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There was a time when grocery stores sold groceries and retail pharmacies sold prescription medicines, OTC (over the counter) and health & beauty. But over the years, grocery retailers have stretched into the pharmacy space looking to drive additional footfall and revenue. Yet while the strongest players in the US, such as Walmart and Kroger operate significant pharmacy operations, they still sit firmly in the single digits for pharmacy market share. Recent years have been especially tough on in-store pharmacies. With low prescription volumes and undifferentiated H&B categories, growth has stalled and even declined as the industry has evolved. As such, grocery-led pharmacy seemed destined to slowly fade away as a casualty of financial cuts and focus back to core offerings.

Enter the Coronavirus.


Suddenly, the future has much less to do with the past and far more to do with the present.

In just a matter of weeks, there has been a global shift dramatically impacting the shopping missions of customers in both how they shop and what priority products are purchased. As we have collectively moved through lockdowns and closures, customers have settled into a new and dramatically different rhythm with a major emphasis on safety and efficiency.

  • Less frequent trips but bigger baskets: As the initial waves of customer traffic subsided, retailers are seeing a significant decrease in customer counts that are significantly below YoY trends. This impact is being offset by large basket sizes in both units and spend as customers seek to limit trips in hopes of minimised virus exposure.
  • Massive move to online: The transition to ecommerce has been an evolution 15 years in the making. 2019 saw a 14.9% jump in online retail sales in the US, bringing total online spending to 16% of total retail sales. The Coronavirus has accelerated that growth trajectory through two main drivers: providing a convenience solution to families that are now homebound and by providing a direct health need for all customers to limit in-store activities, especially older customers who have been slowest to adapt to ecommerce and now those that have the greatest need to use it.
  • Localisation: In addition to fewer trips, customers are also narrowing their range of locations and retailers as they seek out the best option to fit their needs. This is not simply moving to the store that was most shopped prior, but an open consideration of new options as well.
  • Value: During the early rush on hand sanitiser and OTC products, value was of little concern to customers. Now as the full impacts of the shutdown are being felt in terms of job insecurity and unemployment, sensitivity to price, balanced with the right level of quality will become increasingly critical to maintain customers.

As countries collectively move through the Coronavirus pandemic, these behaviours will continue to harden. A new focus on in-store pharmacy could now be a central strategy for grocers, not as a resurrection of the past, but based on the needs of the future.

Stretching across the behavioural shift comes a heightened awareness of staying healthy and practising good hygiene. This has impacted health & beauty categories as customers are learning to be self-reliant now hair salons and beauty spas are shut down. Walmart's CEO has stated that we are in the third phase of panic buying, of which two of three centred on H&B/OTC products [1]. Even after the pandemic subsides, this broader view of personal health, that includes wellness of the person and their surroundings will drive a more holistic set of requirements that are met by grocery and pharmacy products and services.

China's experience with SARS and Covid-19 teach us that much of the acceleration of ecommerce will remain. Grocers will find themselves with increasing levels of underutilised space that can be repurposed with a supercharged version of the pharmacy that reflects the needs and expectations of today. Space will be outfitted with an emphasis on clinical services as well as prescription dispensing. The new services could encompass testing, vaccination, and relief of basic primary care so that hospitals can address those that need it most. Investments can be made in supporting H&B/OTC categories that allow grocers to build credibility in this space that had been previously a peripheral business.

The ability to implement such aggressive changes is a daunting task, especially in uncertain times. One approach to consider is the formation of strategic alliances with an experienced player in the space, specifically retail pharmacies. In the US, former competitors have joined forces to varying degrees with CVS assuming pharmacy operations at Target and Schnucks while Walgreens has built several experimental H&B/OTC spaces in Kroger locations. While these are currently limited to tests or purely the acquisition of formerly failing operations, they have the potential to become much more.

The joint operation can benefit as retail pharmacies continue to expand their capabilities in clinical/medical services and sophisticated H&B/OTC that include prominent innovation and leading-edge private label products. It is critical that efforts are co-ordinated, and the experience seamless for the consumer. There is always a risk of a partnership becoming 'two stores within a store' leading to unnecessary complication and a conflicting value proposition.

A successful implementation of this strategy will allow grocers to provide a compelling solution to customers during, and eventually emerging from Covid-19. A strong in-store pharmacy operation could directly address the health need the pandemic has instilled in customers globally and steer their choice of which stores to visit. Grocers could maximise the less frequent, but larger baskets through incremental products and services that are top of mind for customers.

Finally, opportunities to broadcast superior value through Health & Wellness themed combinations of consumables, H&B, and prescription medicines can appeal to customers as they work through the inevitable recession to come.

Just months ago, the in-store pharmacy was on life support, with a future limited to potential third-party operation at best and oblivion at worst. Coronavirus has changed all of that, and while we will emerge from this pandemic, customer behaviours will return to something other than the past. This new present, with its redefined focus in health will make these solutions essential for the grocery store of future.

[1] https://edition.cnn.com/2020/04/11/business/panic-buying-walmart-hair-color-coronavirus/index.html

[This is the fourth in a series of articles advocating the voice of the Customer in the highly competitive food-retail industry. David Ciancio is Global Customer Strategist for dunnhumby, a pioneer in Customer data science, serving the world's most Customer-centric brands in a number of industries, including retail. David has 48 years experience in retail, 25 of which were in Store Management. He can be reached at David.Ciancio@dunnhumby.com].

Treating Customers differently based on their 'profitability' is counter-productive to building loyalty and toward creating a healthy retail Customer Experience.


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It's a well-worn phrase by now, but it's true that the COVID-19 crisis has drastically altered the global retail landscape. Here in the Asia-Pacific region, a majority of markets are now looking past the panic of the first wave and towards the future. In this series of articles, we'll explore how grocery retailers must adapt to a more omnichannel reality to thrive in a post-pandemic world.

The new wave of online grocery customers

Throughout the COVID-19 crisis we've seen the sharp rise and fall of many trends. As countries veered from one phase of the pandemic to the next, we've seen everything from panic-buying and stockpiling, to a booming demand for hygiene products. While some of these trends have stuck, the resumption of a more 'normal' life in many parts of the Asia-Pacific have seen others tail off.

One trend which is set to stay is in eCommerce, particularly within grocery. Lockdown drove a surge to online grocers the likes of which we have never seen – and it seems customers have been convinced by the online experience. According to multiple recent studies[1] China's grocery eCommerce market, already a booming sector with 29% growth last year, is now tipped to grow by 60% this year as the coronavirus has driven whole new segments of customers to the online grocery market. The trend is also sustaining; the main growth driver in JD.com's record-breaking '618' event this year was grocery, with sales almost doubling[2].

While general retail has been building momentum online for some years, grocery has been something of a laggard, rarely accounting for more than 15% of the overall grocery market. Historically the major barrier to entry to online grocery has been trust – over 50% of customers do not trust online grocery deliveries to pick the freshest and best items[3]. For years this has been a catch-22 scenario for retailers: customers don't trust the quality of online grocery because they haven't tried it, but they won't try online grocery because they don't trust the quality.

COVID-19 has caused a new wave of customers to finally take a leap of faith into digital grocery. Retailers can be happy that they've won new customers online, but now comes the hard work of retaining them.

The need for Customer Infrastructure

Much has been made of retailers' attempts to keep up with surging online demand during the early phases of the pandemic. Even in globally advanced eCommerce markets like the UK, the lead retailer has had to significantly expand delivery capacity to keep up with demand[4]. In order to meet the needs of new customers, retailers have rightly focused on having the right physical infrastructure in place.

However, if retailers want to keep meeting the needs of customers, they'll now need to focus on a different kind of infrastructure - the online customer experience.

The ease of shopping online is a double-edged sword for retailers. If customers can shop online with one retailer, they can shop online with any retailer. Your competitor store is no longer 1 kilometre away, it is one click away. Customers can literally browse competitor shop windows while they are in your store, and for countless retailers in the Asia-Pac region where online sales have historically been low, their digital stores may be looking rather outdated.

So while you may have won new customers, the fight to keep them is much more challenging.

Getting the digital experience right

The principles of great customer experience online are the same as instore. It's about helping customers easily find what they want. It's about helping customers feel they've got a good deal. It's about having a well-laid out store. Fundamentally, a great digital experience is about putting customers first and responding to their needs. Thankfully, the nature of eCommerce makes it possible to know these needs in detail through the wealth of data available to retailers. The data you're likely already collecting will tell you everything required to build a better overall and individual shopping experience for each customer who shops online.

Here are 3 ways retailers can act now to build a winning customer experience online:

  1. Bring the offline online
    Your customers may be new online, but many of them will be existing offline shoppers. Their loyalty card history enables you to show them items they already buy. Better still, predictive data science can detect which of those items are staple and regular purchases that each customer might need right now – helping them quickly and efficiently build a basket based on their own personal behaviour. This knowledge can also help act as an online virtual assistant, helping customers find substitutes for out of stock products and prompting them with items they may have forgotten to add at the checkout.
  2. Make it easy to find value
    In a world where customers can price compare at the flick of a tab, maintaining price perception is vital. This is easier said than done online, as customers won't spend time browsing the 500 products you have on special that week. Instead, use relevancy algorithms to curate your promotions list at the customer level using their previous behaviour, and show each customer the offers that actually matter to them.
  3. Optimise the navigation
    Newer online customers tend to use online search and taxonomy functions much more than experienced online shoppers. If your online category flow is unclear, difficult to interpret or poorly arranged, shoppers will have a harder and more frustrating experience. Equally, if their searches lead to incorrect or blank results, customers will quickly lose patience. Site analytics data in the hands of an expert is a goldmine for optimising the online navigation – from naming and arranging categories in a strong taxonomy to eliminating poor-performing searches.

Retailers in Asia have a limited window of time to win the continued business of new online customers. As these customers become more familiar with the experience, the greater will be their demands and their likelihood to look elsewhere when their experience is sub-optimal.

At dunnhumby, we've been advising grocery retailers on digital best practise for over 10 years, led by 30+ years of leading experience in data science and we have developed a range of products for retailers to deliver exactly these kinds of industry-leading customer experience online, powered by retail data.

In the next part of our series on the post-COVID landscape in Asia-Pacific, we'll explore the diverging needs of customers in the wake of the pandemic, and how omnichannel personalisation can help retailers meet those needs efficiently and effectively.

[1] E-commerce drives China's stay-at-home economy in coronavirus aftermath & China's online grocery sector set for explosive growth, says GlobalData

[2] Chinese shoppers are staying online. That's great news for JD.com

[3] Study cites barriers to online grocery shopping

[4] Tesco Delivers One Million Online Orders In A Week In The UK

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